Socio-Economic Activity and Water Use in Australia's Tropical Rivers: A Case Study in the Mitchell and Daly River Catchments - Final Report for The Tropical Rivers and Coastal Knowledge Research Consortium

Socio-Economic Activity and Water Use in Australia's Tropical Rivers: A Case Study in the Mitchell and Daly River Catchments - Final Report for The Tropical Rivers and Coastal Knowledge Research Consortium

Section 1, Project overview:Tropical Rivers and Coastal Knowledge (TRaCK) is a research hub that was established in 2007 under the Commonwealth Environment Research Facilities Program. Its aim is to provide the science and other knowledge that governments, communities and industries need for the sustainable use and management of Australia’s tropical rivers and estuaries.

One of the research activities undertaken by TRaCK is the description and analysis of the ways in which the components of the socio-economic system interact with each other, and with the environment in the tropical rivers (TR) region. The report presents the results of that research. While some of the research was concerned with the TR region overall, more intensive analysis was conducted for the two focal catchments of the Daly River (NT) and the Mitchell River (Qld).

Section 2, Background to the Tropical Rivers Region and to the two focal catchments:The TR region is approximately 15 per cent of Australia’s mainland but it is home to fewer than 2 per cent of all Australians. Most of the TR region is sparsely populated, with two- thirds of the population living in urban centres and larger localities, of which Darwin is the largest. The population composition is unusual, by comparison with the rest of Australia: with a higher than average Australian male/female ratio, and a younger average age. Almost one-third of the usual residents in the TR region are Indigenous, compared with just two per cent nationally. In terms of the catchment under study, 28 per cent of the Daly River population is Indigenous while 23 per cent of the Mitchell River catchment population is Indigenous.

While the average population turnover rate between 2001 and 2006 is about the same as that for Australia overall, it was very hig for Darwin and the Southern Gulf parts of Queensland and lower along the east coast of the Northern Territory and between the Embley and Coleman River catchments in Queensland. Generally, Non-Indigenous people are much more mobile than rural Indigenous people.

Overall land use in the TR region is dominated by conservation and natural environments. In the Daly catchment, for instance, grazing makes up 54 per cent of land use and 39 per cent of the land remains under what is formally classified as being in “natural condition”: of which 27 per cent is specifically designated as traditional Indigenous use and 5 per cent is set aside for conservation. The remaining land uses are divided among dryland agriculture (5 per cent), intensive uses such as urban, mining or industrial (1 per cent) and irrigated land (1 per cent). In the Mitchell catchment, 95 per cent of land use is directed towards production from unchanged land (i.e. grazing); 3 per cent of the land is in natural condition and almost exclusively under conservation, and land under intensive use (including urban, mining, industrial) is minimal at 0.03 per cent. Interestingly, there is no natural land solely reserved for Indigenous use in the Mitchell as opposed to the Daly.

Across the entire TRaCK region the Government Services sector accounts for 25 per cent of employment. The next most significant sector of employment is Agriculture, Forestry and Fishing (11.5 per cent), while Mining, Retail and Construction eachcomprise around 4 per cent. The same general pattern of employment is true in both the Daly and Mitchell catchments. However, in the Daly catchment, the importance of the Government Services sector is much more noticeable. By comparison to the Mitchell catchment, fewer people are employed in the Agriculture, Forestry and Fishing sector (4 per cent in the Daly, as opposed to 15 per cent in the Mitchell).

Sections 3 and 4 – Identifying an appropriate modeling technique, and refining the methodological approach:After extensive consultation with stakeholders and other researchers, and a thorough examination of existing models that could be used or adapted, it was decided to build an Input-Output (IO) model for each catchment that would differ from the usual IO model in two ways. Firstly, the household sector in each model was divided into Indigenous and Non- Indigenous households. The Indigenous/Non-Indigenous split allows the impacts of change to be measured for those two groups separately. Secondly, the IO models involved the modeling of water use for individual industries and households.

Section 5 – Operationalising the models and populating them with data:Data for Non-Indigenous households were obtained from a mail-out survey in the two focal catchments, while most of the data for the Indigenous households were obtained from during face-to-face interviews. Other data required for this modeling were obtained from the ABS and from an earlier, associated, survey of businesses in Northern Australia. Much of the data had to be ‘transformed’ prior to use, and where ever possible, data were compared with other related data sources (e.g. the ABS’s household expenditure survey) to test plausibility prior to inclusion in the model.

Section 6.1 – using the models to estimate income, employment and water multipliers:The models were used to estimate Type I and Type II income multipliers (defined in section 4), and also employment and water multipliers. In addition to considering aggregate impacts, the analysis looked at the distributional impacts of change, providing the following insights:• A one-dollar increase in final demand in almost any business sector generates a net increase in regional income of between $1.60 and $2.40, depending upon the sector. Most of that money (i.e. at last $1.00) stays within the sector that is initially stimulated, but there are flow-on effects to other sectors.

• In most cases, it is the Finance sector (which, in this model, includes property and business services), the Retail sector (including both retail and wholesale trade) and Non-Indigenous households which benefit most from ‘flow-on’ effects. In most cases, these sectors receive approximately $0.20 each. In stark contrast, Indigenous Households generally receive just a few cents in flow-on effects; approximately one- half of one per cent of the total regional stimulus, and just one per cent of the total flow-on effects.

• The largest flow-on increase in Indigenous incomes occurs if one stimulates the Government sector, but even there, the flow-on effect is just $0.05 following a $1.00 initial increase.

• When Indigenous incomes are increased exogenously (which could occur, for example, via an increase in royalty payments or an increase in Centrelink payments), Non-Indigenous people capture more of the flow-on effects than do Indigenous people. A $1 exogenous increase in Indigenous incomes results in Indigenous people gaining a flow-on benefit of just $0.01 - $0.03, whereas Non-Indigenous people gain a flow-on increase of $0.18 - $0.26.

• Stimuli affect the labour market in a similar manner: economic growth always creates significantly more jobs for Non-Indigenous householders than Indigenous householders. These differences are not entirely attributable to differences in population.

• Although there is relatively little variation in Type I and Type II income multipliers across sectors, there are significant differences in employment multipliers. For example, a $1 million expansion of the Accommodation sector creates, in aggregate, more than four times as many new jobs in the Daly River catchment than an equivalent expansion of the Mining sector.

• There are also significant differences in water multipliers across different industries. Water multipliers in the Agricultural sector are orders of magnitude larger than those in other sectors, although care must be taken when interpreting data relating to the Mining and Manufacturing sector: as noted by the NALW taskforce (2009, p 23) “mining and resource projects are generally excluded from water resource accounting, exact water use estimates for this industry are not readily available”. Consequently, the estimates presented here may understate – perhaps grossly – actual figures for the mining sector.

• There is a marked difference between the water-use multipliers that have been estimated using upper and lower-bound water use coefficients. To the extent that water is at least partially substitutable with other resources (e.g. it is possible to reduce water use and still grow certain types of plants by, for example, mulching, or applying water at critical phases of a plant’s growth cycle), these results clearly illustrate the importance of water-saving technologies and research, particularly in the agricultural sector.

Section 6.2 – using the models to explore various growth scenarios:The models were also used to examine the possible impact of different types of economic growth in the catchments. The models were used to calculate results for one year, and then extrapolated for the next 20 years. The results were as follows:

1. The ‘balanced’ growth scenario (of 1.5 per cent per annum across all industries) significantly out-performed all other scenarios for employment and income in the Daly. It was one of the top two generators of income and employment in the Mitchell (alongside the 5 per cent growth in Agriculture scenario). Within 20 years, this scenario increased Industry Income and Non-Indigenous Employment to levels that were close to 1.6 times greater than in 2006. Indigenous employment outcomes were more modest – rising to between 1.4 and 1.5 times the 2006 levels. This balanced growth scenario was also associated with moderate increases in consumptive water demand – rising to between 1.2 and 1.7 times 2006 levels depending upon whether one used lower or upper bound estimates.

2. In the Mitchell River, growth in the Agricultural sector generated substantial increases in business/industry incomes and in Non-Indigenous employment. Outcomes for Indigenous people were much more modest. If growth in Agriculture is achieved using water-efficient techniques (‘mimicked’ here, with the lower-bound water use coefficients), then in 2026, our models predict that consumptive water demand would be just 1.6 times greater than 2006 levels; but consumptive water demand could be more than double 2006 levels in less than a decade if higher water-use coefficients prevail.

3. Income and employment outcomes associated with the Agricultural scenario were more modest in the Daly than in the Mitchell, but pressures on consumptive water demand were similar in both catchments. Outcomes for Indigenous people (incomes and employment) were also very modest in both regions – rising by less than 10 per cent, in total, over a 20 year period.

4. The tourism scenario delivered the smallest ‘returns’ to income and employment for both Indigenous and Non-Indigenous households, in both catchments. This is a consequence of the fact that tourism currently makes a relatively small contribution to these economies (just 3 and 2.3 per cent of the Mitchell and Daly River’s Gross Value Added, respectively). Consequently, 5 per cent growth in tourism represents a very small increase in economic activity (5 per cent of 3 per cent is not much at all!).

5. The mining scenario delivered marginally better household income and employment outcomes to both Indigenous and Non-Indigenous households than did the tourism scenario, but the returns were still quite small. In contrast, the associated increase in industry output/incomes were relatively good and even out-performed those of the agricultural scenario in the Daly River. The predicted increases in consumptive water demand were similar for the mining and tourism scenarios. However, as noted earlier, these simulations may under-estimate (perhaps substantially) the amount of consumptive water demand associated with the mining sector.Section 7 – Discussion and concluding comments:These results are important to anyone involved in, or interested in, northern economic development. They provide an indication of the downstream benefits from the stimulation of any industry, though not, of course the costs of such stimulation. Whilst the results of our analysis are only directly associated with two focal catchments, many other catchments in the region are socioeconomically ‘similar’. As such, the key messages (if not precise estimates) may be relevant across many northern regions. These key messages are:

1) There is an asymmetric divide between Indigenous and Non-Indigenous economic systems in Northern Australia. Given the lack of employment and business opportunities, workplace skills, and the other infrastructure prerequisites for development, local Indigenous people are very unlikely to benefit from the stimulus of any of the north’s existing industries. This situation is likely to persist unless, or until, there is structural change.

2) Some industries may be able to generate significant business income and/or incomes for some householders, but will not necessarily deliver significant localised benefit in terms of, for example, employment (be it Indigenous or otherwise). Development strategists may thus need to explicitly acknowledge these tradeoffs and make conscious decisions about what it is they wish to ‘develop’ (e.g. Regional income or regional employment? Regional income or Australian income?). Moreover, strategists may need to think about innovative methods of redressing some of the potential problems arising from such tradeoffs, ensuring that the methods allow for the structural idiosyncrasies of these small northern economies (i.e. the asymmetric divide noted above).

3) Water multipliers differ by orders of magnitude depending upon assumptions made about the numbers of litres of water consumed per dollar output particularly in the Agricultural sector. This clearly highlights the fact that water-saving technologies are vitally important.

4) Both Agriculture and mining are capable of generating significant income flows. But, unlike growth in the government, health or educational sectors, growth in theagricultural sector2 is associated with significant growth in consumptive water demand. Development strategists may thus also need to explicitly acknowledge some of the non-monetary impacts of different development options (not all of which will be negative), seeking to identify ways in which to exploit synergies, redress tradeoffs, and thus capitalise on opportunities that do not place un-due strain upon the region’s natural resources (water being but one of many important examples).